Sun and Moon Corporations Each Have Only One Class of Stock

question 107

Multiple Choice

Sun and Moon Corporations each have only one class of stock outstanding.Their stock ownership is shown below. $$\begin{array} { | c | c | c | } \hline \text { Shareholder } & \text { Sun Corporation } & \text { Moon Corporation } \\\hline \text { Arthur } & 50 \% & 60 \% \\\text { Brenda } & 20 \% & 40 \% \\\text { Charles } & 30 \% & \ldots \\\hline\end{array}$$ Which of the four stock ownership changes that are illustrated is the minimum change that is needed if Sun and Moon Corporations are to be brother-sister corporations? (Assume the two corporations are equally valued. )

• A)No stock ownership change is required.
• B)Arthur or Brenda acquire an additional 10% of Sun Corporation.
• C)Charles must acquire an additional 5% of Moon Corporation.
• D)Arthur must acquire an additional 30% of Moon Corporation.

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Definitions:

Fixed Overhead Budget

A financial plan that projects the expected fixed costs required to support the operations of a business.

Standard Machine-Hours

A predetermined measure of the amount of machine time required to produce a unit of product, used in costing and budgeting.

Machine-Hours

A measure of production output or activity based on the number of hours a machine is operated within a given period.

Power Cost

Power cost refers to the expenditure associated with the consumption of electrical energy by a company or an individual.